SMEs got billions of pesos in tax break from TRAIN: DOF

July 18, 2018

Small and medium enterprises (SMEs) received tax breaks amounting to billions of pesos from January to June under the Tax Reform for Acceleration and Inclusion (TRAIN) Act as they are covered by higher value-added tax (VAT) threshold and can choose from two options to be able to pay lower income taxes, according to Finance Secretary Carlos Dominguez III in a finance department statement Wednesday.

A report by the Bureau of Internal Revenue (BIR) during an executive committee (ExeCom) meeting of the Department of Finance (DOF) showed that from January to June this year, VAT collections mostly in the BIR’s regional offices fell but collections from the percentage tax and income tax increased.

This indicated that many SMEs have benefited from raising the VAT threshold from P1.9 million to P3 million under TRAIN.

Dominguez said increases in the percentage and income tax collections over 2017 indicate SMEs and self-employed individuals that have not exceeded the VAT threshold are opting to pay the 8 percent income tax on gross sales or receipts and other non-operating income or the percentage tax and the graduated income tax rates under TRAIN.

From January to June this year, VAT collections amounted to P63.217 billion in the BIR’s regional offices, lower than last year’s P72.813 billion reported during the same period in 2017, according to BIR preliminary data reported during the Execom meeting.

However, percentage tax collections in the regions rose to P18.079 billion from P12.130 billion in 2017.

The January-June figure for percentage tax collections also exceeded the BIR’s goal of P14.803 billion for this period.

Income tax collections in the regions also rose to P207.332 billion from P206.454 billion in the same period in 2017. This also surpassed the BIR goal of P198.618 billion for this period.

For the entire country, income tax collections rose to P500.585 billion for the January-June period, higher than the BIR goal of P450.375 billion and the 2017 collection of P489.456 billion. DMS